Boosting passive income is one of my aims with my holdings. With that in mind, Glencore (LSE: GLEN) shares look like they could be perfect for me. Let’s take a closer look at the investment case.
Commodities
Glencore is one of the world’s largest commodities traders. It is active in markets for metals, minerals, and energy products. Some of the commodities it produces include coal, copper, zinc, and iron ore.
So what’s happening with Glencore shares currently? Well, as I write, they’re trading for 459p, which is close to the same price as at this time last year, at 460p. More tellingly, the shares are down 20% from January, when they were trading for 578p.
I believe this is due to the gloomy macroeconomic outlook that has pushed down many shares. Despite this, I believe there could be a good opportunity to pick up cheap Glencore shares that could boost my passive income.
The bull and bear case
I’m buoyed by Glencore’s position in the market and the outlook for commodities in general. Glencore has a global footprint and is established in the market as one of the world’s leading players. Forecasts indicate that demand for commodities is only set to rise in the coming years. If you add to this that demand should outstrip supply, Glencore could translate this into future earnings and investor returns.
Next, for any passive income stock, I want to know that I can rely on consistent payouts. One measure of this is a firm’s balance sheet. Glencore has a rock-solid balance sheet, in my opinion. It has minimal debt and lots of cash reserves, which are useful when the economic picture is uncertain, like now. This can ensure dividends are still paid out and growth plans can be executed too.
Finally, Glencore shares have an enticing dividend yield of 8% right now. However, I do understand that dividends are never guaranteed. In addition to this, due to the market pullback, the shares look dirt-cheap on a price-to-earnings ratio of eight.
To the bear case then, commodities stocks like Glencore can struggle when the economy is struggling, like now. Soaring inflation throughout the world and rising interest rates have hampered the economy. Demand for metals can drop during this period, which can hurt performance and returns.
In addition to the cyclical nature of Glencore’s business, it is always worth mentioning that mining operations can be hit by issues. For example, production issues or accidents during mining can impact production, as well as performance and investor sentiment. This is an ongoing risk I’ll keep an eye on.
A stock ideal for passive income
Upon reviewing the pros and cons, I like the look of Glencore shares. I believe they would boost my holdings. I would be willing to buy some shares when I have the spare cash to do so.
Glencore has an enticing yield and is trading at a discount, in my opinion. Furthermore, it has an enviable position in the market through its worldwide operations as well as a healthy balance sheet. Finally, I can see it always looking to grow the business through acquisitions. This can help boost future earnings and investor returns.
